Abstract This paper describes the development of New Zealand's Earth System Model (NZESM) and evaluates its performance against its parent model (United Kingdom Earth System Model, UKESM) and observations. The main difference between the two earth system models is an embedded high‐resolution (1/5°) nested region over the oceans around New Zealand in the NZESM. Due to this finer ocean model mesh, currents such as the East Australian Current, East Australian Current Extension, Tasman Front, and Tasman Leakage, and their volume and heat transports are better simulated in the NZESM. The improved oceanic transports have led to a reduction in upper ocean temperature and salinity biases over the nested region. In addition, net transports through the Tasman Sea of volume, heat and salt in the NZESM agree better with previously reported estimates. A consequence of the increased cross‐Tasman Sea transports in the NZESM is increased temperatures and salinity west of Australia and in the Southern Ocean reducing the meridional sea surface temperature gradient between the subtropics and sub‐Antarctic. This also leads to a weakening of the westerly winds between 60°S and 45°S over large parts of the Southern Ocean, which reduces the northward Ekman transport, reduces the formation of Antarctic Intermediate Water, and allows for a southward expansion of the Super‐Gyre in all ocean basins. Connecting an improved oceanic circulation around New Zealand to a basin‐wide Super‐Gyre response is an important step forward in our current understanding of how local scales can influence global scales in a fully coupled earth system model.